Lawyers Comment On First EAT Case Relating To Purely Voluntary Overtime
Employees who regularly work voluntary overtime beyond their contracted hours may now have to have those payments included in their holiday pay, following a significant decision which could have huge implications for UK businesses.
In the case of Dudley Metropolitan Borough Council v Willetts (and others) the Employment Appeals Tribunal (EAT) said that voluntary overtime worked for a sufficient period of time on a regular and/or recurring basis should be included in the first four weeks’ paid holiday.
The case started when a number of holiday pay claims were brought against the Council by a group of 56 employees responsible for the repair and maintenance of council houses.
They worked a set number of hours per week (usually 37) which counted as their normal working hours. In addition, once in every four weeks, and in some cases five weeks, they were on an on call register and worked additional voluntary hours. However, these voluntary payments were excluded from their holiday pay and the workers argued that this was contrary to the Working Time Regulations 1998 (WTRs).
Their claims were initially successful and the Council appealed to the EAT.
The EAT upheld the earlier decision and drew on previous ECJ decisions which had emphasised that workers should receive ‘normal remuneration’ when they take a holiday. Workers should not be deterred from exercising their rights to take paid annual leave and any reduction in salary is presumed to act as a deterrent.
The case was remitted back to the Tribunal to determine whether or not, on the facts, Mr Willett and his co-workers had been underpaid holiday.
Lawyers at Irwin Mitchell say the decision will not expose employers to backdated claims for voluntary overtime because employees who have a break of more than three months between payments will not be able to argue that they have suffered a series of unlawful deductions. This is because the requirement to include non-guaranteed overtime only relates to 20 days' leave required under the Working Time Directive holiday and not to additional leave.
However, the firm points out that the decision may leave employers vulnerable to claims relating to underpayment of holiday in their current holiday year.
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“This decision is extremely important and it is the first occasion the EAT has heard cases relating to purely voluntary overtime. Many businesses have adopted a ‘wait and see’ approach to voluntary overtime but this option is no longer possible and overtime that is worked regularly, must now be included in holiday pay.
“Not all voluntary overtime will have to be included but the EAT made it clear that overtime that ‘extends for a sufficient period of time on a regular or recurring basis’ will.
“There is no statutory definition of what amounts to ‘normal pay’ and Tribunals will continue to hear arguments about whether overtime, of whatever nature, has become part of an employee’s normal pay.”
Glenn Hayes - Partner